Retirement Annuity Basics

A retirement annuity can be a great addition to any investment portfolio especially if you are seeking to diversify your investments. But what makes it so special? If you want to retire with guaranteed source of income minus the risks, then a retirement annuity is the right insurance product to purchase. But don't just go off purchasing an annuity just yet. Approach any reputable insurance company such as Puritan Financial Group and they will tell you that there are different types of annuities available. If you don't have a working knowledge of what these types are, just the act of choosing which product to get can be confusing. To help you choose the best type of annuity based on your needs, read on.



Annuities Explained



Annuities will begin to generate income as soon as you put in your initial investment or the first investment in consecutive payments. You can receive a lump-sum payout on a set date, or you can opt for a set of payouts on a series of dates. Other than the lump-sum payout option, you can also opt to get your annuity payouts on a monthly, quarterly or annual basis. Payouts can also be set to be received over the years as you live, or you can set it for every number of years. The amount of money that you can possibly receive will be dependent on different factors such as the total of your investments in the annuity, your payment duration, as well as the performance of the assets where your annuity payments were invested (applicable only for variable annuity).



Immediate Annuities and Deferred Annuities



The two common types of annuities are deferred and immediate. A deferred annuity pretty much works like a certificate of time deposit. Your money is tied to a fixed period of time until the annuity matures. With this type of annuity, you may not withdraw from the annuity until you retire. This differs from an immediate annuity as from the name itself, you can expect to be paid shortly after you make your first investment. But perhaps the easiest way to distinguish one from the other is to remember that an immediate annuity pays out money while a deferred annuity amasses it for later distribution.



Deferred and immediate annuities can also be variable or fixed. A fixed annuity basically generates fixed payout/s for the investor, while an immediate annuity mostly has its payouts based on the performance of its underlying investments in the market.



You can greatly increase the stability of your investment portfolio because of the steady income a retirement annuity can provide. Just be wary of abusive sales agents and brokers who may persuade you to buy retirement annuities for their own gain and charge you with expensive prices for products that might not be beneficial for your retirement plans. Perform your own research to make sure that you only buy the correct type of retirement annuity from the most excellent provider. Then you can ask for rates from several providers and come up with a shortlist of insurers with the assistance of an independent retirement advisor. If you are looking for an independent retirement advisor, start by looking at companies such as Puritan Financial Group.

Immediate Annuities versus Deferred Annuities



Many retirement planners and investment experts recommend that you transfer a portion of your assets from deferred annuities to immediate annuities. Why? This is because deferred annuities do not promote early withdrawals, which means that you can't take distributions or withdraw your money before the annuity matures or you will have to pay hefty fines. On the other hand, immediate annuities can provide income as soon as you start making your payments. Because the immediate annuity aims to satisfy the need for retirement income almost instantly, it helps to avoid the possibility of outliving your savings.



When You Need to Buy Immediate Annuities



Immediate annuities can be practical investments for people in various financial and personal situations. For example, a person who used to participate in employer-sponsored defined-contribution plans can withdraw the money in his account and use that money to buy an immediate annuity - this gives him the ability to add to his guaranteed income streams. Companies can also finance pension plans with defined benefits via investments in immediate annuities for their employees. If the future annuity buyer has exhausted means such as making maximum contributions to his 401K or IRA, he can also benefit from immediate annuities.



If you plan to go for an immediate annuity, you have the option to structure payments so that they vary with the performance of a particular set of investments. This is what is referred to as a variable immediate annuity. It is a variation of an immediate annuity with your money being invested in mutual funds and the like. As such, the amount you will get will be based on market conditions. To learn more about the different types of annuities you should contact a company such as Puritan Financial Group.



Immediate annuities have become popular over the years due to the growth in its target market. People retire early and the advancement in science and medicine has made it possible for senior citizens to live longer compared to before. A person who retires at the age of 60 is likely to live until the age of 80 and beyond, allowing him to enjoy the benefits of an immediate annuity until his last days.